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Section 121: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 120 All 266 Sections of Indian Contract Act Section 122

Legal Commentary & Landmark Judgments: Section 121

Historical Section 121 of the Indian Contract Act, 1872 addressed the seller's right to rescind the contract where the buyer defaulted in payment or performance, establishing that in the absence of an express reservation of the right to rescind, mere non-payment did not automatically entitle the seller to cancel the contract. Codified and refined in Sections 54 and 57 of the Sale of Goods Act, 1930 read with Section 55 of the Contract Act, this rule regulates the legal threshold for rescission.

  • Time as Essence of Payment: Generally, stipulations as to time of payment are not deemed to be of the essence of a contract of sale unless a different intention appears from the terms of the contract.
  • Requirement of Repudiatory Default: Mere delay in payment does not entitle the seller to rescind unless the contract expressly reserves a right of rescission, or the buyer's conduct amounts to an absolute repudiation.
  • Notice of Rescission and Effect on Title: Rescission requires clear and unequivocal communication; once lawfully rescinded, the property in the goods reverts entirely to the seller.
Key Landmark Precedents:
  • Martindale v. Smith (1841) 1 QB 389: Foundational ruling establishing that a vendor who sells goods cannot treat the contract as rescinded merely because the vendee fails to pay the price on the agreed day, unless time of payment was made the essence of the contract by express terms or subsequent notice.
  • Mahabir Prasad Rungta v. Durga Datta AIR 1961 SC 990: The Supreme Court held that rescission of a commercial contract requires clear communication, and rescission without giving reasonable notice to perform where time is not of the essence renders the rescinding party liable for wrongful breach.
Courtroom Practice & Strategic Litigation Guidance:

Never advise a seller to summarily cancel a supply agreement upon a buyer's payment delay unless the contract has an explicit termination clause. Always issue a 'time is of the essence' notice granting a reasonable cure period (e.g. 14 days), stating clearly that failure to pay will result in immediate rescission and damages under Section 55 and 73 of the Contract Act.

Section 120 All 266 Sections of Indian Contract Act Section 122